The sudden weakening of the rupee has set some cash registers ringing for Indian apparel exporters, at least for a short run. According to industry players, margins in apparel exports have risen by five-seven per cent in the past few days.
“The bottom line has improved for us. The rupee depreciation has increased our export realisations by five-seven per cent. This will encourage us to go for more orders now,” says Gautam Jain, partner of Bangalore-based garment exporter Mahalaxmi INC.
The Indian currency hit a lifetime low of Rs 58.98 on Tuesday before closing at 58.38 to the dollar, compared with the level of 53.31 in January 2012.
The rupee depreciation seems to have come at a right time for the industry since orders for the next season have begun pouring in. “Exporters should now begin to hedge, as orders would be coming in for the next spring and summer seasons. This would give an additional margin surety of five-seven per cent,” says Rahul Mehta, president of the Clothing and Manufacturers Association of India.
Increasing profitability would also now help Indian apparel exporters go for more orders, say industry experts. According to Prashant Agarwal, joint managing director of apparel consulting firm Wazir Advisors: “Though there will be an immediate advantage for apparel exporters, they should now get profit and also go for more orders. Earlier, Indian apparel exporters used to leave certain orders for China due to lack of profitability. This can change now.”
However, Agarwal also believes the real benefit for exporters could come if the rupee sustains at the current level. “The real benefit could only accrue when the fluctuation continues till four-six months,” he adds.
Such has been the rally of margins for apparel exporters that even their buyers are already asking for discounts. “Buyers are now asking for reduction in prices or some discounts. They are now stating the Indian apparel exporters could pass on a Rs 1-2 per dollar benefit to buyers,” says A Sakthivel, chairman of the Apparel Export Promotion Council (AEPC).
Buoyed by the rise in margins due to the rupee depreciation, Indian apparel exporters are also looking to hedge at the current levels.
“It’s a very attractive level to hedge at. Also, the situation has improved our competitiveness against other competing nations like China, Vietnam, Bangladesh and Sri Lanka. We are now expecting a rise in orders towards India,” says Premal Udani, chairman and managing director of Kaytee Corp Ltd.
Meanwhile, according to AEPC, this could also boost export volumes for the current financial year. The council is now estimating apparel exports to be over $14 billion for 2013-14 against $12.92 billion in 2012-13.
THE SILVER LINING
- 0-5% Profitability of apparel exporters, at the rupee’s previous levels of 52-53/dollar
- 7-8%Expected rise in profitability at current levels of 57-58/dollar
- $12.92 bn Indian apparel industry’s exports in 2012-13, at levels of 52-53/dollar
- $14-15 bn Estimated exports in 2013-14, at current levels of 57-58/dollar
- 57% Expected rise in apparel export orders in the coming days